By Tiernan Ray

Shares of Amazon.com (AMZN) traded down tonight $18.51, or almost 5%, to $384.50, recovering from a 12% drop, after the company this afternoon reportedQ4 revenue and profit that missed analysts’ expectations, and projected this quarter’s revenue below consensus as well.

Chief financial officer Tom Szkutak held a conference call with the Street following the report.

After a fairly routine summary of the results, Szkutak opened the floor to questions. The first one was about the company’s rate of growth, from Citigroup’s Mark May, who asked why the company’s unit sales growth had declined to 25% from prior quarters. Said Szkutak,

First, the unit growth, you are right. It was 25% year-over-year, it is a deceleration, a small deceleration from the last couple quarters. Keep in mind, that it is — certainly our biggest quarter, most seasonal. And so, both from a revenue and from a unit standpoint, you saw a deceleration from Q3 to Q4 of 2012 also. And so, we saw a deceleration, not of the same magnitude we saw back in 2012, from Q3 to Q4. But if you take a look at the total growth, it is 25% on a unit basis, 22% ex exchange on a revenue basis. We saw very good growth in North America, up 26%. This is again, on a revenue basis. It is down sequentially a little bit in the last couple quarters, but certainly up from Q4 last year where we grew 23%. In the international, the revenue was up about 15% ex exchange. If you look at the pieces, certainly one of the biggest things you are seeing is, if you look at the media growth in our digital categories within media and international is growing very fast. But as we have been talking about for quite some time, certainly a shift going from physical to digital. You see that reflected in North America media growth rates. The reason why you don’t see it as much in our international is because we are at the very early stages of that. So that is what you are seeing in terms of the differential, certainly one of the key differentials between the international media growth rate, and the North America growth rate.

An analyst followed up by asking whether the dip in sales volume was related to the just-concluded holiday season being shorter than past holiday seasons in the U.S. Szkutak was not much help, replying, “In terms of the shorter period for shopping it’s hard to tell honestly; It’s hard to know. It definitely was a shorter period from post-Thanksgiving to the holiday, but again hard to know.”

Gene Munster of Piper Jaffray, later in the call, asked about the “high-level philosophy” of the company given the company’s attitude seems to be that profit is a “distant thought.”

Szkutak replied,

We’re looking to maximize cash flow in those investments over time. And so we have some investments that certainly start to pay off and become profitable in a three- to five-year period, we have others that have been a bit longer, but, again, we’re monitoring those investments very carefully. Our goal is to maximize free cash flow for investors over time. But clearly our goal and not something we’re working towards. All that being said, we’re investing in a lot of the business right now, you can see that when you look at our results. And the reason why we’re doing that is because of very large opportunities that we see, and we do go in cycles. As you think of our historical results, from time to time, we’ll pull back to make sure the model is working, and we have done that, and I’m sure you’ll see that going forward. At times as well. But again we’re focused on making sure that we have a great customer experience, and we maximize free cash flow for the long-term.

Bernstein’s Carlos Kirjner asked if a slow-down in capital spending meant that the company’s “Amazon Web Services” cloud computing facility was now growing more slowly than in past.

Szkutak rejected the suggestion:

Do we expect this is an indication the AWS is slowing down? No, it’s not, we’re very pleased with the AWS business, it is growing very fast. The team is doing a fantastic job from the product and service standpoint, and we’re very excited about that business. For opinions about what CapEx might be in the future, related to the growth rate in AWS, it is going very, very well.

There were tons of questions about the company’s $79 free shipping subscription service, “Amazon Prime,” after Szkutak remarked that “we are considering increasing the price of Prime between $20 to $40 in the US.”

Prime’s price has not been increased in the nine years since the offering was rolled out, Szkutak pointed out. He said higher shipping costs, which Amazon swallows with the fixed price of Prime, is one thing promoting possibly higher prices. But another factor is the company’s offer of unlimited downloads of videos and other services, noting that “Prime video we’re investing very heavily and so those are certainly costly; those are the reasons for the price increase that we’re contemplating.”

One analyst asked about how many subscribers might be affected by a price increase. Szkutak punted on the question, simply reiterating that the company had “tens of millions” of satisfied customers for Prime throughout the world.

The early trend among analysts tonight is to defend the company’s revenue miss while cutting estimates and price targets.

Cantor Fitzgerald‘s Youssef Sqauli reiterated a Buy rating on the shares, while cutting his price target to $415 from $425.

Squali cut his 2014 estimates to $88.6 billion and 62 cents a share from a prior $90.4 billion and $2.77.

Writes Squali,

NA sales grew 25% Y/Y vs. 30% in 3Q, while Int’l (ex. FX) grew 15% Y/Y from 20%. While this trend is consistent with the broad slowdown in US e-commerce reported by comScore (11% in 4Q vs. 13% in 3Q), we note that AMZN continues to grow more than twice as fast as the overall market and to take share. This, coupled with a “record setting holiday season for Prime”, which now has 20-30M members WW, by our estimates, shows that Amazon continues to effectively leverage its superior value proposition to attract higher-value Prime members.

And Victor Anthony with Topeka Capital Markets reiterated a Buy rating, but cut his price target to $450 from $480, and cut his 2014 estimates to $88.6 billion, and $3.38 per share from a prior $91.1 billion, and $4.22.

Writes Anthony,

Given the hype throughout the quarter (“record setting holiday season for Amazon Prime”, “millions of customers unwrapped Kindle e-readers and Kindle Fire tablets”), investors demanded more by way of top-line growth, particularly as traditional retailers struggled. Overall, however, we believe Amazon reported a good quarter and our thesis on the stock is unchanged. Our price target reduces to $450 from $485 on slightly reduced estimates.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.